The hidden costs of hotel bookings

Why direct reservations aren’t always the profit win hoteliers expect

Understanding the true cost of a hotel booking is more complex than it appears. A recent HSMAI Revenue Optimization Advisory Board discussion highlighted how marketing spend, labor, loyalty, and distribution fees can erode margins—even on so-called “direct” bookings.

Key takeaways

• Direct bookings can be costly: Marketing campaigns, loyalty perks, payroll, and third-party tools often chip away at direct booking profitability.
• Benchmarking tools help, but aren’t perfect: Platforms like Juyo Analytics and Kalibri Labs’ Hummingbird offer near reservation-level cost insights, but precision remains elusive and resource-intensive.
• Net RevPAR has limits: Traditional benchmarks don’t fully capture distribution efficiency; some hoteliers are experimenting with new formulas like RevPAR with markups / Net RevPAR.
• Loyalty costs are underestimated: Discounts, upgrades, and perks tied to loyalty programs often go uncounted in profitability analyses.
• Labor and group sales add hidden expenses: Payroll, especially for sales teams, represents a major but frequently overlooked distribution cost.
• PMAX is gaining traction: Google’s Performance Max campaigns are becoming a key channel strategy, helping hotels compete more effectively with OTAs.

Get the full story at HSMAI